UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Form
(Mark One)
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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For the quarterly period ended |
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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For the transition period _______ to _______ |
Commission file number:
(Exact name of registrant as specified in its charter)
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(State or other jurisdiction of incorporation or organization) |
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(I.R.S. employer identification number) |
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(Address of principal executive offices) |
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(Zip Code) |
Registrant’s telephone number, including area code:
Securities registered pursuant to Section 12(b) of the Act:
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Title of each class |
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Trading Symbol(s) |
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Name of each exchange on which registered |
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The |
Indicate by check whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):
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Larger Accelerated Filer ☐ |
Accelerated Filer ☐ |
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Smaller Reporting Company |
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Emerging Growth Company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐ Yes ☐ No
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
The number of shares of ClearOne common stock outstanding as of November 7, 2023 was
CLEARONE, INC.
QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 2023
INDEX
CLEARONE, INC
(Dollars in thousands, except par value)
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September 30, 2023 |
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December 31, 2022 |
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ASSETS |
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Current assets: |
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Cash and cash equivalents |
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$ |
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$ |
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Receivables, net of allowance of $ |
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Inventories, net |
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Prepaid expenses and other assets |
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Total current assets |
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| Long-term marketable securities | ||||||||
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Long-term inventories, net |
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Property and equipment, net |
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Operating lease - right of use assets, net |
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Intangibles, net |
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Other assets |
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Total assets |
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$ |
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$ |
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LIABILITIES AND SHAREHOLDERS' EQUITY |
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Current liabilities: |
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Accounts payable |
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$ |
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$ |
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Accrued liabilities |
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Deferred product revenue |
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| Short-term debt | ||||||||
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Total current liabilities |
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Operating lease liability, net of current |
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Other long-term liabilities |
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Total liabilities |
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Shareholders' equity: |
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Common stock, par value $ |
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Additional paid-in capital |
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Accumulated other comprehensive loss |
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Accumulated deficit |
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Total shareholders' equity |
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Total liabilities and shareholders' equity |
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$ |
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$ |
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See accompanying notes
CLEARONE, INC.
COMPREHENSIVE LOSS
(Dollars in thousands, except per share amounts)
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Three months ended September 30, |
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Nine months ended September 30, | ||||||||||||
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2023 |
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2022 |
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2023 |
2022 | ||||||||
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Revenue |
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$ |
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$ |
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$ | $ | ||||||
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Cost of goods sold |
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Gross profit |
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Operating expenses: |
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Sales and marketing |
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Research and product development |
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General and administrative |
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Total operating expenses |
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Operating loss |
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| Interest expense | ( |
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Other income (loss), net |
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Loss before income taxes |
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Provision for income taxes |
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Net loss |
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$ |
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$ |
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Basic weighted average shares outstanding |
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Diluted weighted average shares outstanding |
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Basic loss per share |
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$ |
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$ |
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Diluted loss per share |
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$ |
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$ |
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$ | ( |
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Comprehensive loss: |
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Net loss |
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$ |
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$ |
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Unrealized loss on available-for-sale securities, net of tax |
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Change in foreign currency translation adjustment |
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( |
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Comprehensive loss |
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$ |
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$ |
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$ | ( |
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See accompanying notes
CLEARONE, INC.
(Dollars in thousands, except per share amounts)
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Nine Months Ended September 30, |
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2023 |
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2022 |
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Cash flows from operating activities: |
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Net loss |
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$ |
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$ |
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Adjustments to reconcile net loss to net cash provided by (used in) operating activities: |
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Depreciation and amortization expense |
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Amortization of right-of-use assets |
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Share-based compensation expense |
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Change of inventory to net realizable value |
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| Gain recognized on Paycheck Protection Plan Loan forgiveness | ( |
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| Gain (loss) on disposal of assets and sale of marketable securities | ( |
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Changes in operating assets and liabilities: |
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Receivables |
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Legal settlement receivable |
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Inventories |
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Prepaid expenses and other assets |
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Accounts payable |
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Accrued liabilities |
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Income taxes receivable |
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Deferred product revenue |
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Operating lease liabilities |
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Net cash provided by (used in) operating activities |
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Cash flows from investing activities: |
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Purchase of property and equipment |
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Purchase of intangibles |
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Capitalized patent defense costs |
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Proceeds from maturities and sales of marketable securities |
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| Purchases of marketable securities | ( |
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Net cash provided by (used in) investing activities |
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Cash flows from financing activities: |
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| Dividend payment | ( |
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Net proceeds from equity-based compensation programs |
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Paycheck Protection Program loan refund upon full forgiveness net of loan payments |
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Principal payments of debt |
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Net cash provided by (used in) financing activities |
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Effect of exchange rate changes on cash and cash equivalents |
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Net increase in cash and cash equivalents |
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Cash and cash equivalents at the beginning of the period |
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Cash and cash equivalents at the end of the period |
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$ |
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$ |
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See accompanying notes
CLEARONE, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands, except per share amounts)
The following is a summary of supplemental cash flow activities:
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Nine Months Ended September 30, |
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2023 |
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2022 |
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Cash paid for income taxes |
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$ |
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$ |
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| Cash paid for interest | ||||||||
See accompanying notes
CLEARONE, INC.
(Unaudited - Dollars in thousands, except per share amounts)
1. Business Description, Basis of Presentation and Significant Accounting Policies
Business Description:
ClearOne, Inc., together with its subsidiaries (collectively, “ClearOne” or the “Company”), is a global market leader enabling conferencing, collaboration, and AV streaming solutions for voice and visual communications. The performance and simplicity of our advanced, comprehensive solutions offer unprecedented levels of functionality, reliability and scalability.
Basis of Presentation:
The fiscal year for ClearOne is the twelve months ending on December 31. The condensed consolidated financial statements include the accounts of ClearOne and its subsidiaries. All significant inter-company accounts and transactions have been eliminated.
These accompanying interim unaudited condensed consolidated financial statements have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) and are not audited. Certain information and footnote disclosures that are usually included in financial statements prepared in accordance with generally accepted accounting principles in the United States (“GAAP”) have been either condensed or omitted in accordance with SEC rules and regulations. The accompanying condensed consolidated financial statements contain all adjustments, consisting of normal recurring accruals, necessary for a fair presentation of our financial position as of September 30, 2023 and December 31, 2022, the results of operations for the three and nine months ended September 30, 2023 and 2022, and the cash flows for the nine months ended September 30, 2023 and 2022. The results of operations for the three and nine months ended September 30, 2023 and 2022 are not necessarily indicative of the results for a full-year period. These interim unaudited condensed consolidated financial statements should be read in conjunction with the financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2022 filed with the SEC.
Significant Accounting Policies:
The significant accounting policies were described in Note 1 to the audited consolidated financial statements included in the Company’s annual report on Form 10-K for the year ended December 31, 2022. There have been no changes to these policies during the quarter ended September 30, 2023 that are of significance or potential significance to the Company.
Recent accounting pronouncements:
In June 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2016-13, Financial Instruments - Credit Losses (Topic 326). The new standard amends guidance on reporting credit losses for assets held at amortized cost basis and available-for-sale debt securities. In February 2020, the FASB issued ASU 2020-02, Financial Instruments-Credit Losses (Topic 326) and Leases (Topic 842) - Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 119 and Update to SEC Section on Effective Date Related to Accounting Standards Update No. 2016-02, Leases (Topic 842), which amends the effective date of the original pronouncement for smaller reporting companies. ASU 2016-13 and its amendments will be effective for the Company for interim and annual periods in fiscal years beginning after December 15, 2022. CECL estimates of expected credit losses on trade receivables over their life will be required to be recorded at inception, based on historical information, current conditions, and reasonable and supportable forecasts. The Company adopted the standard in its first quarter of 2023. There was no material impact on the results of operations.
The Company has determined that recently issued accounting standards, other than the above discussed, will not have a material impact on its consolidated financial position, results of operations or cash flows.
UNAUDITED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)
Liquidity:
As of September 30, 2023, our cash and cash equivalents were approximately $
2. Revenue Information
The following table disaggregates the Company’s revenue into primary product groups:
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Three months ended September 30, |
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Nine months ended September 30, | ||||||||||||
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2023 |
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2022 |
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2023 |
2022 | ||||||||
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Audio conferencing |
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$ |
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$ |
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$ | $ | ||||||
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Microphones |
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Video products |
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$ |
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$ |
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$ | $ | ||||||
The following table disaggregates the Company’s revenue into major regions:
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Three months ended September 30, |
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Nine months ended September 30, | ||||||||||||
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2023 |
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2022 |
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2023 | 2022 | ||||||||
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North and South America |
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$ |
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$ |
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$ | $ | ||||||
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Asia Pacific (includes Middle East, India and Australia) |
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Europe and Africa |
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$ |
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$ |
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$ | $ | ||||||
UNAUDITED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited - Dollars in thousands, except per share amounts)
3. Loss Per Share
Loss per common share is computed based on the weighted-average number of common shares outstanding and, when appropriate, dilutive potential common stock outstanding during the period. Stock options, warrants and the convertible portion of senior convertible notes are considered to be potential common stock. The computation of diluted earnings (loss) per share does not assume exercise or conversion of securities that would have an anti-dilutive effect.
Basic earnings (loss) per common share is the amount of net earnings (loss) for the period available to each weighted-average share of common stock outstanding during the reporting period. Diluted earnings (loss) per common share is the amount of earnings (loss) for the period available to each weighted-average share of common stock outstanding during the reporting period and to each share of potential common stock outstanding during the period, unless inclusion of potential common stock would have an anti-dilutive effect.
The following table sets forth the computation of basic and diluted earnings (loss) per common share:
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Three months ended September 30, | Nine months ended September 30, | ||||||||||||||
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2023 | 2022 | 2023 |
2022 |
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Numerator: |
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Net loss |
$ | ( |
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Denominator: |
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Basic weighted average shares outstanding |
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Dilutive common stock equivalents using treasury stock method |
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Diluted weighted average shares outstanding |
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Basic loss per common share |
$ | ( |
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) | $ | ( |
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Diluted loss per common share |
$ | ( |
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) | $ | ( |
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Weighted average options, warrants and convertible portion of senior convertible notes outstanding |
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Anti-dilutive options, warrants and convertible portion of senior convertible notes not included in the computation |
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UNAUDITED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)
4. Marketable Securities
The Company has classified its marketable securities as available-for-sale securities. These securities are carried at estimated fair value with unrealized holding gains and losses included in accumulated other comprehensive loss in stockholders’ equity until realized. Gains and losses on marketable security transactions are reported on the specific-identification method. Dividend and interest income are recognized when earned.
The amortized cost, gross unrealized holding gains, gross unrealized holding losses, and fair value for available-for-sale securities by major security type and class of securities as of September 30, 2023 were as follows:
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Amortized cost |
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Gross unrealized holding gains |
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Gross unrealized holding losses |
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Estimated fair value |
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September 30, 2023 |
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Available-for-sale securities: |
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| US Treasury securities | $ | $ | $ | ( |
) | $ | ||||||||||
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Corporate bonds and notes |
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$ |
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$ |
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$ |
( |
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$ |
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Total available-for-sale securities |
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$ |
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$ |
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$ |
( |
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$ |
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There were no available-for sale securities as of December 31, 2022.
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Amortized cost |
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Estimated fair value |
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Due within one year |
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$ |
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$ |
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Due after one year through five years |
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Due after five years |
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Total available-for-sale securities |
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$ |
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$ |
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UNAUDITED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)
Debt securities in an unrealized loss position as of September 30, 2023 were not deemed impaired at acquisition and subsequent declines in fair value are not deemed attributed to declines in credit quality. Management believes that it is more likely than not that the securities will receive a full recovery of par value, although there can be no assurance that such recovery will occur. The available-for-sale marketable securities with continuous gross unrealized loss position for less than 12 months and 12 months or greater and their related fair values were as follows:
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Less than 12 months |
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More than 12 months |
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Total |
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Estimated fair value |
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Gross unrealized holding losses |
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Estimated fair value |
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Gross unrealized holding losses |
|
|
Estimated fair value |
|
|
Gross unrealized holding losses |
|
||||||
|
As of September 30, 2023 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
US Treasury securities |
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
( |
) |
|
Corporate bonds and notes |
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
Total |
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
( |
) |
5. Intangible Assets
Intangible assets as of September 30, 2023 and December 31, 2022 consisted of the following:
|
|
|
Estimated useful lives (years) |
|
|
September 30, 2023 |
|
|
December 31, 2022 |
|
||||
|
Tradename |
|
|
to |
|
|
|
$ |
|
|
|
$ |
|
|
|
Patents and technological know-how |
|
|
to |
|
|
|
|
|
|
|
|
|
|
|
Proprietary software |
|
|
to |
|
|
|
|
|
|
|
|
|
|
|
Other |
|
|
to |
|
|
|
|
|
|
|
|
|
|
|
Total intangible assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated amortization |
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
Total intangible assets, net |
|
|
|
|
|
|
$ |
|
|
|
$ |
|
|
The amortization of intangible assets for the three and nine months ended September 30, 2023 and 2022 was as follows:
|
|
Three months ended September 30, |
Nine months ended September 30, |
||||||||||||||
|
|
2023 | 2022 | 2023 |
2022 |
||||||||||||
|
Amortization of intangible assets |
$ | $ | $ | $ | ||||||||||||
The estimated future amortization expense of intangible assets is as follows:
|
Years ending December 31, |
|
Amount |
|
|
|
2023 (Remainder) |
|
$ |
|
|
|
2024 |
|
|
|
|
|
2025 |
|
|
|
|
|
2026 |
|
|
|
|
|
2027 |
|
|
|
|
|
Thereafter |
|
|
|
|
|
Total |
|
$ |
|
|
UNAUDITED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)
6. Inventories
Inventories, net of reserves, as of September 30, 2023 and December 31, 2022 consisted of the following:
|
|
|
September 30, 2023 |
|
|
December 31, 2022 |
|
||
|
Current: |
|
|
|
|
|
|
|
|
|
Raw materials |
|
$ |
|
|
|
$ |
|
|
|
Finished goods |
|
|
|
|
|
|
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term: |
|
|
|
|
|
|
|
|
|
Raw materials |
|
$ |
|
|
|
$ |
|
|
|
Finished goods |
|
|
|
|
|
|
|
|
|
|
|
$ |
|
|
|
$ |
|
|
Long-term inventory represents inventory held in excess of our current (next 12 months) requirements based on our recent sales and forecasted level of sales. We expect to sell the above inventory, net of reserves, at or above the stated cost and believe that no loss will be incurred on its sale, although there can be no assurance of the timing or amount of any sales.
Net loss incurred on valuation of inventory at lower of cost or market value and write-off of obsolete inventory for three and nine months ended September 30, 2023 and 2022 was as follows:
|
|
Three months ended September 30, |
Nine months ended September 30, | ||||||||||||||
|
|
2023 | 2022 | 2023 |
2022 |
||||||||||||
|
Net loss incurred on valuation of inventory at lower of cost or market value and write-off of obsolete inventory |
$ | $ | $ | $ | ||||||||||||
7. Leases
Rent expense is recognized on a straight-line basis over the period of the lease taking into account future rent escalation and holiday periods.
Rent expense for three and nine months ended September 30, 2023 and 2022 was as follows:
|
|
|
Three months ended September 30, |
|
Nine months ended September 30, | ||||||||||||
|
|
|
2023 |
|
|
2022 |
|
2023 |
2022 |
||||||||
|
Rent expense |
|
$ |
|
|
|
$ |
|
|
$ | $ | ||||||
The Company occupies a
The Company occupies a
UNAUDITED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)
The Company occupies a
The Company occupies a
Supplemental cash flow information related to leases was as follows:
|
|
|
Nine months ended September 30, |
|
|||||
|
|
|
2023 |
|
|
2022 |
|
||
|
Cash paid for amounts included in the measurement of lease liabilities |
|
|
|
|
|
|
||
| Operating cash flows from operating leases | $ | $ | ||||||
| Right-of-use assets obtained in exchange for lease obligations: | ||||||||
| Operating leases | $ | $ | ||||||
Supplemental balance sheet information related to leases was as follows:
|
|
|
September 30, 2023 |
|
|
December 31, 2022 |
|
||
|
Operating lease right-of-use assets |
|
$ |
|
|
|
$ |
|
|
|
|
|
|||||||
| Current portion of operating lease liabilities, included in accrued liabilities | $ | $ | ||||||
|
Operating lease liabilities, net of current portion |
|
|
|
|
|
|
|
|
|
Total operating lease liabilities |
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
| Weighted average remaining lease term for operating leases (in years) | ||||||||
| Weighted average discount rate for operating leases | % | % | ||||||
The following represents maturities of operating lease liabilities as of September 30, 2023:
|
Years ending December 31, |
|
|
|
|
|
2023 (Remainder) |
|
$ |
|
|
|
2024 |
|
|
|
|
|
2025 |
|
|
|
|
|
2026 |
|
|
|
|
|
2027 |
|
|
|
|
| Thereafter | ||||
|
Total lease payments |
|
|
|
|
|
Less: Imputed interest |
|
|
( |
) |
|
Total |
|
$ |
|
|
UNAUDITED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited - Dollars in thousands, except per share amounts)
8. Shareholders' Equity
|
|
|
Three months ended September 30, |
|
Nine Months Ended September 30, | ||||||||||||
|
|
|
2023 |
|
|
2022 |
|
2023 | 2022 | ||||||||
|
Common stock and additional paid-in capital |
|
|
|
|
|
|
|
|
||||||||
|
Balance, beginning of period |
|
$ |
|
|
|
$ |
|
|
$ | $ | ||||||
|
Dividends paid |
|
|
|
|
|
|
|
( |
) | |||||||
| Issuance of common stock and warrants, net | |
|||||||||||||||
|
Share-based compensation expense |
|
|
|
|
|
|
|
|
||||||||
|
Proceeds from employee stock purchase plan |
|
|
|
|
|
|
|
|
||||||||
|
Balance, end of period |
|
$ |
|
|
|
$ |
|
|
$ | $ | ||||||
|
|
|
|
|
|
|
|
|
|
||||||||
|
Accumulated other comprehensive loss |
|
|
|
|
|
|
|
|
||||||||
|
Balance, beginning of period |
|
$ |
( |
) |
|
$ |
( |
) |
$ | ( |
) | $ | ( |
) | ||
|
Unrealized loss on available-for-sale securities, net of tax |
|
|
( |
) |
|
|
|
( |
) | ( |
) | |||||
|
Foreign currency translation adjustment |
|
|
( |
) |
|
|
( |
) | ( |
) | ( |
) | ||||
|
Balance, end of period |
|
$ |
( |
) |
|
$ |
( |
) |
$ | ( |
) | $ | ( |
) | ||
|
|
|
|
|
|
|
|
|
|
||||||||
|
Accumulated deficit |
|
|
|
|
|
|
|
|
||||||||
|
Balance, beginning of period |
|
$ |
( |
) |
|
$ |
( |
) | $ | ( |
) | $ | ( |
) | ||
|
Net loss |
|
|
( |
) |
|
|
( |
) |
( |
) | ( |
) | ||||
|
Balance, end of period |
|
$ |
( |
) |
|
$ |
( |
) |
$ | ( |
) | $ | ||||